Hiring drops by 278,000, the quieter labour market figure

The short version

• The number of new hires fell by 278,000 in July, the hiring rate dropped 0.2 points to 3.2 percent and therefore to its lowest reading since February.
• Job openings stayed almost stable and edged up to 7.27 million.
• The purchasing managers index for manufacturing stood at 54.6 points in August, the employment sub index fell 1.6 points to 51.2.

The figure that barely makes headlines

The American labour market data for July contains a reading that barely makes headlines and is unusually meaningful. The number of new hires fell by 278,000, the hiring rate dropped 0.2 points to 3.2 percent. That is the lowest reading since February.

Job openings by contrast stayed almost stable and edged up to 7.27 million, which was roughly in line with expectations.

The difference to the unemployment rate

That is exactly where the difference to the better known measure lies. The unemployment rate can stay stable while the market beneath it hardens. Whoever has a job keeps it. Whoever has none finds one with more difficulty.

The picture in industry

Industry also shows a mixed picture. The purchasing managers index for manufacturing stood at 54.6 points in August, one point below July and slightly below the expectation of 55.3. The employment sub index fell 1.6 points to 51.2. Readings above 50 stand for growth.

Assessment

Stable job openings alongside collapsing hiring is a pattern worth knowing. Companies keep their listings open but do not fill them. That is not a crisis but hesitation.

For the rate debate this figure matters more than the unemployment rate, because it reacts earlier. Layoffs come at the end of a cooling, absent hiring at the beginning.

Anyone who wants to judge the coming months should therefore look less at the rate and more at how many people actually start a new job.

Frequently asked questions

What does the hiring rate measure

It says how many people start a new job in a month, measured against all employees. Unlike the unemployment rate it measures movement rather than a state. It shows whether a labour market is permeable, that is whether someone who is looking also finds something.

How do stable job openings and collapsing hiring fit together

Companies keep their listings open but do not fill them. Job openings edged up to 7.27 million in July, while the number of new hires fell by 278,000. That is not a crisis but hesitation.

What does the purchasing managers index say in August

For manufacturing it stood at 54.6 points, one point below July and slightly below the expectation of 55.3. The employment sub index fell 1.6 points to 51.2. Readings above 50 stand for growth.

This analysis is for information only and is not investment advice.